The Insurance Development and Regulatory Authority (IDRA) has appointed an observer to the board of directors of Takaful Islami Insurance PLC, a company listed on the stock market, amid ongoing concerns over its boardroom governance and a disputed director election.
The decision was taken following a governance review meeting with the company and under Section 51(c) of the Insurance Act 2010. The appointment places the insurer’s board proceedings under closer regulatory observation, although the appointment letter does not specify any particular irregularity or allegation that prompted the latest move.
In a letter issued on Thursday, 15 October, IDRA appointed its Assistant Director, Marufa Akter, as the board observer until further notice.
The letter, signed by Mohammad Solaiman, IDRA’s Deputy Director for non-life insurance, sets out the scope of the observer’s responsibilities. She is required to attend board meetings and report the decisions taken to the regulatory authority. However, she will not have voting rights and will not be permitted to express opinions or make decisions during the meetings.
The company’s chief executive officer and company secretary have been instructed to invite her regularly to board meetings and provide the relevant notices. The arrangement will allow IDRA to remain informed about the board’s deliberations and decisions without giving the observer direct authority over the company’s decision-making process.
Although the appointment follows a governance review, the letter does not identify any specific misconduct or explain whether the measure is linked directly to the company’s earlier board disputes. It would therefore be premature to conclude that the appointment establishes any new wrongdoing by the insurer.
Dispute over directors’ election
The appointment comes against the backdrop of a prolonged disagreement over the composition of Takaful Islami Insurance’s board. IDRA has taken several regulatory steps following allegations of irregularities in the election of directors at the company’s 25th annual general meeting.
After investigating the allegations, the regulator stated in its directions that the election had breached Rule 11(2) of the Director Election Rules 2024. It also reported a discrepancy between the actual voting results and the results announced by the company.
On the basis of its findings, IDRA directed the removal of five directors and instructed the company to include the five candidates elected according to the actual vote count. The insurer was given 20 working days to implement the directive.
The regulator subsequently said that its instructions had not been properly implemented. In a directive issued in January, IDRA warned that failure to comply with its orders could amount to a violation of the Insurance Act.
The dispute raised questions about the integrity of the election process and the company’s compliance with regulatory instructions. For an insurer, board governance is particularly significant because directors are responsible for overseeing management, exercising accountability and ensuring that the company operates within the applicable legal and regulatory framework.
Board dispute reaches the High Court
The disagreement over the director election also reached the courts.
In May this year, several directors of the company complained to IDRA that a writ petition had been filed with the High Court challenging the regulator’s directive without the approval of the board of directors. They alleged that the proposed legal action had neither been discussed nor authorised at a board meeting.
The complaint introduced a further point of contention: whether the decision to challenge the regulator’s order had been taken through the company’s proper internal governance procedures.
The available information does not establish the final outcome of the complaint or the court proceedings. The allegations should therefore be distinguished from any findings that may subsequently be made by the relevant authorities.
Closer scrutiny of corporate governance
IDRA’s latest appointment provides a formal channel through which the regulator can monitor the insurer’s board proceedings and receive information about decisions as they are taken. While the observer cannot vote or influence decisions through formal voting rights, attendance at meetings will enable her to report the board’s actions directly to the authority.
The measure also comes at a time when the implementation of regulatory directives and the legitimacy of the company’s board composition remain important issues. The observer’s presence may help IDRA assess whether board decisions are being taken in accordance with the applicable rules and whether its earlier instructions are being addressed.
However, the appointment should not be interpreted as proof of a fresh violation. The precise reasons for the decision have not been detailed in the letter, and no new finding of misconduct has been established by the information available.
Attention will now focus on the company’s compliance with IDRA’s directions, the handling of the disputed election and the steps taken to resolve the governance issues. Any further regulatory action will depend on the authority’s assessment of the company’s conduct and its compliance with the relevant legal requirements.